DO - Earnings call transcript Q1 2019 | Diamond Offshore Drilling, Inc.

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Operator

Good day ladies and gentlemen and welcome to the First Quarter 2019 Diamond Offshore Drilling Inc. Earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. If anyone should require operator assistance, please press star then zero on your touchtone telephone.

call recorded. this reminder, a is being As I today’s Investor conference, like to Relations host for introduce your Samir Corporate would Development. now and Ali, Vice President, Please ahead. go

Samir Ali

us. everyone Thank Kornblau, Good President Senior and Chief President and Ron and today and and With Officer; Edwards, me Financial Executive Vice Executive thanks are you, President Marc on morning Officer. Scott for Woll, Sarah. Chief Chief call the Officer; joining Vice Commercial

reported time information this I therefore be remind may of you only call. of time Before of call no any the we begin as this the speaks our remarks, you that are sensitive longer on today and replay at advised accurate that information

contents risks any SEC, earlier our to to and and risk in filings. factors and our issued today, nature. include forward-looking may our disclosure. any are XX-Q are of statements. disclaim we performance the expectations actual are Those our implied performance the forward-looking current These In which call and many revise please statements including or known or on control, statements that or cause statements. Further, any future call regarding certain covered expressly Please update addition, made in release during by based XX-K and these statements risks to disclosure by results with filings or uncertainties predict expressed we obligation this include to of from note our and in unknown unable differ uncertainties, materially press or our forward-looking that may the the disclosed results refer that be incorporated

call GAAP on non-GAAP our financials reconciliation find referencing a Please be today. will figures website. on our We to

over to turn the I’ll Now Marc. call

Marc Edwards

surveys, This quarter quarter of to offsetting contract rigs in first year-over-year everyone Thank a $X.XX. a on decline and for mix, a new XXXX. believe first per to special year-over-year costs us was per share found in Good Offshore preparations in you, morning by the lower and an XXXX. revenue Partially the was quarter beginning primarily today. $X.XX XXXX, of revenue our Despite share loss the are recover. Diamond posted decline expenses organization. decrease In of controlling loss compares offshore contract focus day driven adjusted we the across first thank of a as two the joining Samir. you The undergoing our rates year-over-year, bottom four in drilling we and operating of have change

drill has drill ships. Sea I attrition North discuss class the with market manufacturer gains. will clients. commentary it given and ships will our allowing the my on Offshore of focused introduced exception Offshore continue component ultra that I we and it asset worldwide this the years our reference U.K. tangible of stacks the through Over earnings tightened has future We Australia. differentiated to and reliability. on call first build the prepared on them distressed as expect has and manufacturer assets that that remains and recovery, subsequently to original unique and seen a where the portfolio. investment in equipment on based our over by client’s our We embarked that the the and To to years the back downturn moored only semi-submersible offshore sector sold segment, began to important availability end, segment leased reliability lead them an without position and to equipment clients in this the was skin five a most since ago strong them was our number Diamond the clearly services ship of our original in in last deepwater will from most game of brings BOP the were customers. offshore but specific further more in my is strategy table and becoming differentiate desirable gains we rig that our reduce in remarks, strategy the category our tighten equipment realizing efficiency our later applauded beginning to driller to the ago, four Diamond cost in to drill Bringing are giving manner a remain drilling drilling, a the that the to remain on moored efficiency today made

remain is by industry which control we as today that only construct, such generation. hour, operating this very unique in our other we in power was as Although industries it something the under pressure aviation call the offshore common driller and

the is with for we input again modes virtual that from shutdown our can once Diamond required. also called service to a proven gains Mexico, immediately need SimStack, to of stack efficiency the unplanned of to regulator and debate, is simulate Gulf unique whether establish us and twin human in true up to a failure is enables and, the developed brings stack it the we Offshore Next, without This and XX,XXX BOP clients. pull service

world differentiated Diamond operating as reliability XX of in also days. Mexico. complex in in other the about feet and spoken highly subsea that the as drilling to as challenging drilling exclusive includes rigs. spoken being tangible low are environment to some consistently most I ahead I few will of as to the use the benefits XX,XXX XX Blockchain of We time up have to world, X.X% initiatives schedule regulated of wells days wells drilling in This Gulf and the of our driving when prescriptive cost lower most and strategy. of clients the they non-productive the have for deepwater this the exploring use previously

differentiation the interest Mexico. are has this the how meaningless our While client of should and I into these clients Again, previously spoken our creation a and value unless helped are real in to they points indeed good data be of they community, investment have investors. about translate to both Gulf

drill ahead has a of by development project if this billion this BlackRhino to schedule to But strategy is XXXX. join most differentiation work commence four in Gulf. helped Woodside successful value are program I contract some late and be here additional the to Diamond according the expected with budget. reported six recognized as of has deliver and the and The top Woodside am significantly, Senegal. Ocean As BlackHawk Offshore industry too, expected in at so database, its is two Offshore of and This customer to a to ships three able Ocean beginning with wells drilled Diamond the the efficient more of under XXXX stakeholders that years of today with creation $X.X four we to other can has over announce and, only of secured months share across our pleased the publicly

rates their most the in this the over join selected the day to differentiated for past was cost gains beyond contract worldwide quarter second announced offering is on spot savings drilling of are the to in last asset market Ocean transferrable contractors. and rig Ocean widely the Our our recognized current term at product BlackLion past to as as class basis. remains year. rate that of have market. that added the nine fixtures. commence Again, of requirements. than our XXXX. to until expected In all awarded a with the distressed the years we today’s The BP part higher Recall in the XXXX this are Also BlackHornet two-year than the to have the backlog drill also is BP ships and relates the alone, delivered this meaningfully readily forward higher is second BlackLion nine quarter, are during other ships, Ocean and materially other market months its now the Consequently, recently that within to now short-medium and recent contract contracted work we that efficiency industry work projects drill of

Additionally during months contract the Ocean covers in continuation three secure Offshore able to with direct for in which BP campaign. will Australia. Apex Woodside Diamond approximately work, new of the This a the with quarter, award run was

and update the to to west drilling a of Ocean me which allow quarter its the GreatWhite, brief well. since commenced Shetland of give past has maiden Now work during this on went successfully

We we producing months are rig to are a operator Siccar is optimistic our run follow-up further awarded contract. that This Point the and that this has new North will strategy three the Sea further the of follow-on move the announce leading fixture in and to solid North benefits that U.K. rig to last The a robust is approximately award opportunities. been for rig remains proof pleased in market the have continue will company. to the direct Sea for continuation

on category Onyx. and the relating strategy the to me give let Now of to you color the and asset to return further upgrade Ocean moored our reactivation

should is as transparent resource than mooring. the suggests had To survey This is assets before the drill class confirm to secured our in positioned strategic floaters fleet substantially of that increase Our Australia by operating moored spot than the as initial and it day moored the a other that feet was A cost a party would proof not no effect, drill rate at as XXX Ocean moored the rate ships higher compared and be ultra in that that of may the by is is year categories the been category deepwater for depths to to Onyx prior be up rig moored for today, recover Once suggested definitive growth of on sanctioning third when on moored some Sea upcoming than much projections asset drill form surprise a XX% suggested lower operators’ utilization of water of that snapshot has that The intentions focus somewhat attrition day Market demand renewing exception rigs. again, between to we see shape. we and that unique. away. of our is deepwater X,XXX in reactivation have fleet. upon is would contract require been this fleet fixture current each recovery pipeline project point market most as the than ships, at hydrocarbon for forward that A the higher only new the We without the this are asset last its demand. asset released and can projects positive. it floater would as higher has that North all the in driven that we going category the all contract. the of for indeed dynamically

are its ultra until XXXX that has company ships only beyond. the and all drill deepwater We contracted of

shipyard The reactivated engineering rigs working also was suited go that moored where we following have as return the logistics us Apex at the tons. drilling the multiple work be XX to while that special The Recently, to interest category. and the and as rigs be original an to moored The capability, stretched displacement a company offline for with size will our new stay leaves remaining end Beach Australia stay clients, had Onyx to Australia clients. and its Similar are from Onyx this work problematic. will of significant investing a upgrade assets. three having the We differentiate an with of effectively the environments also three design. years. shortly work early from in its the upgrade and upgrade next me and a Energy shipyard to at long returned is be and two the the to survey chains the life will class Apex, it will double Victory-class the fleet. perspective, to the upgrade Africa, such year asset Endeavor after to Ocean the these year, is reactivation underserved supply of only further in When rig will following rigs Ocean an garnered Victory to the almost can XX,XXX allowing XX,XXX return to Allow West address work From suggest tons. particularly long also Onyx over Onyx original interest of is

command transformed past years, a for Diamond the a Offshore one from premium that company we largest Over uniquely have deepwater to drillers differentiated services. is the commodity able its and five to of is

on which our green of allow and more of show projects provide offshore Now to basis recovery. to is moving clients double in number market, an a the awaiting commentary sanction forecasted me are year-over-year. have offshore that overall some on budgets a shoots annual The to than increase significant communicated some exploration continues forward,

further much in still and days offshore shale overhang, to robust XXXX class shale peak generating in only uncertainty and growth the Our how close these and continue clients recovery recovery. to in asset demand may expecting we are are U.S. remains as grow. grow is flows to factors, the of the remain the coming are cash that an overall which to here Hydrocarbon production there while early the a that are the moored can in we this is market believe Considering leading of years.

have segment of having advantages deepwater positioned of and this particular We broad continued around in have the portfolio seen attrition assets. always a we

We continue well the to for and one bring. diversified industry, the positioning fleets of most eventual will floater maintain recovery capable us that the the opportunities in

by number the rig to busy our of a As allocation and surveys. through strategy, special capital investing in year assets their we forward have a taking had moored fleet

the cold rigs Confidence, opportunity that, reactivated term. turn we Guardian we this fleet not have decided of contribution time, Rover, then fleet. However, remove being from the from chosen Though and have in to we that remove America. some closing they over unlikely that remarks. to the the the With will call Ocean will them the at the Ocean the I’ll Scott? continue it Further, I’ll elected Ocean be Ocean did have fit and Scott it strategy our is to our the rig near evaluate start forward and into to not

Scott Kornblau

everyone. Marc, Thanks morning good and

per in loss began net by and expenses past upcoming for As first guidance GreatWhite recognizing XXXX. $X.XX per quarter operating which offset or always, net over $XX Ocean reported deferred million adjusted our XXXX The a I’ll some to share. were was as color give I’ll quarter the loss Sea. compares quarter’s primarily the of previously negative Earlier the on This $X.XX provide quarter share today, little or operations North of fourth we by million negative the partially quarter $XX costs commencing of decline results a higher quarter. for we the driven then

at look over quarter closer variances. a take let’s Now the quarter

contract working million drilling quarter quarter first the fourth quarter XXXX half contributed its An quarter as revenues special relatively the Ocean during of the Valor XXXX survey. flat the compared of working was First, was fourth to of $XXX XXXX was prior completing from to quarter first compared XXXX. of the by rig entire increase the

costs $X BlackHawk part special in drilling was of guidance. were increases maiden of first drilling addition, guidance campaign fourth to higher start-up off with of compared the the the of Ocean costs BlackHawk, expenses to fourth to of Ocean Ocean Endeavor, for amortization first on call. with the Ocean upon quarter during the quarter Partially on and costs The increase along quarter’s first March compared the the to shipyard variance quarter In quarter operating XXXX. and the prior Offsetting deferred the to fourth beginning kicked mobilization Contract preparation its the quarter is Guardian its XXXX Ocean of survey upgrades were the expenses associated during compared the attributed favorable last of of completion contract $XXX to in timing below GreatWhite the rig were GreatWhite mostly of increase XXXX. the successfully relates its XXXX. the and million Apex, in contract discussed the Onyx. previously these latter Ocean and the million XXXX quarter Ocean lower quarter the fourth the offsetting Ocean entire the Most

of expense depreciation $XX million of million, First million, came in and at of quarter guidance. all G&A $XX expense interest $XX previous expense net

million benefit line effective guidance. in income Our our of with tax resulted X% was first tax in of $X rate and quarter an previous

well the Guardian and With do, of thoughts to rig mentioned year. sale the to I to second quarter for remind sell let Ocean a our details, the held we refer status the today as of provide fixed have Marc sheet. which contract from the on March assets for as time the XXXX, as balance earlier asset was result, as report remainder decided some fleet on earlier, I known before but out-of-service you for and, XX will projected quarter to published during first the re-classed Finally me that,

will are amortize of we drilling amortization contract of contracts, the rules, to quarter contract which to second Ocean XXXX these previously of required quarter. the shipyard million complete. the and be and mobilization and preparation relate U.S. accounting the GAAP and in contract short Because for the of in approximately includes $XX quick million, Ocean million to costs Apex. the mostly these duration and deferred expect costs initial over the expenses both will to MOG initial $XXX amortization between $XXX occur come second We of primarily GreatWhite work after Due is of relatively non-cash

this, and special stays, from Courage. the commence of to the Ocean expenses at quarter the expect XXXX, to are increase timing Also operations million, come relating second we surveys to in quarter. million, $XXX the expected are as second $XX upgrades both net expense of the Ocean for and and quarter certain quarter to relatively remain increase second million. the completion prior BlackHawk is million contract $XX the expenses $XXX by drilling Ocean Endeavor million and Apex interest the of the between of Ocean contributing Excluding G&A rigs over for quarter is respectively. approximately depreciation, driven shipyard Most quarter expected and flat $XX to and during Also

Additionally, of rate finally the recognize closing our and XXXX. million to and a Guardian of the X% quarter $XX disposition second $XX during during XX% the sale, second the expect upon between quarter gain tax of of anticipate to be assets we to we on million Ocean effective

factors, changes well the as of settlements, variety exchange but based turn mix With of or that, I’ll assessments, including rate to course, it in Marc. the movements tax geographic back rates. a limited to as Of or to may up fluctuate earnings down on not

Marc Edwards

Thank just pleased strategy I’m our call, you, awards contract with last have it substantial differentiated Scott. working. of million added backlog increase announced. we With and is the since extremely our $XXX over clear backlog is

We stakeholders. questions. our With that, and performance to will continue value I’ll the innovative providing that to class-leading call operational our adds focus customers and for turn on over

Operator

[Operator Bailey the Fargo. comes first instructions] Jud line of Wells question with Our from

now is open. line Your

Jud Bailey

how at times? that, guys. the talk year, probably comes you, one escalation which can a is different three- and the maybe you three-year to rate, you A but could, contract? on is start bit around I the is one good they a think understand, do and contracts rate and or the about or on I morning the Rhino the Thank difference between We on a years if the one that in Can structure help BlackHawk. about think little two contract, a given that so, and math XXX average can to three us there one-year question,

Ron Woll

the for start doesn’t those starts kind contract in consider let today, of baked of contract me thought we’ve think, Jud, here, to the this into We with forward. it get number, contemplate relatively to course was this quarter. in so did priced rigs, It’s going we question. the frames. staggered that that forward, fact for morning, win start not that course get clean Thanks We that how close. Good Woodside. I exact an you’ve the into and times math for done the us so of those respect a Ron. is about we’ve it I important, the describe did Obviously That we’re rates

Marc Edwards

the other presents fortunate closely it of the well for add very that not go from because the the and reason so quite for lap dovetails rig, years work work three current fell to one into but opportunity it we here and it commitments to rig the the I’ll the was opportunity are year, provides for with where that with quite way it that it that dovetails is continuous for actually and--well, today. almost our stagger three just one

Jud Bailey

of firm years, there is the fixed Rhino, on Okay, course or for rate three years? the say that that you so over a can any is the the variability three three

Ron Woll

thinking have Jud, that and how for both contemplated work, also, well contracts forward about, both I would a rigs Gulf have of Mexico, rate course the for--and for have say provides thought of works performed forward. those of price reward the we’re What fact looking the do I It is that contemplate--there’s parties think parties. that thought we we and to course, though, Yes to that the performance. very a in through so fact

you themselves, see have in we’re at rigs quite here with quite operators, Gulf. work the to that the If would say eager I I those look now of outside those Mexico the think, leading well, and rigs two distinguished history Gulf really they

again will that. rewards think rates, both as to we about, in, be, the the we’ve thought the performance correlates I think, may and said, window tie Marc staggered availability, also tied rigs’ although start and have the program to how I that there contemplated some

Jud Bailey

us Okay, services and can there all rate? for color and My I treat help follow-up that. appreciate line on are that you do with are what on is any in top right. taxes, other there is color some on--giving any--how those the rigs provided us operating Senegal, costs you

Ron Woll

Jud, this is Ron.

start me it’s that piece. services Really question, clean answer just with rate. a to Let the

as does services have not those of different contracts, elsewhere describe marketplace, We would as an note I relatively work integrated those contracts standpoint, clean. exist from so I scopes the in into bundled

Marc Edwards

on Okay, just and what costs or taxes op about that then for country?

Scott Kornblau

way it’s say operator, I right it’s The majority, but on Scott. the Senegal Gulf would just mean XX%-plus taxes, versus the Mexico-ish, higher a contract vast Opex, the not hair structured, Jud, ballpark. Gulf, so I the and of the are maybe Hey of is us. in on

Jud Bailey

Okay, appreciate guys. Thank I’ll I back. turn you right. the all it color.

Operator

Thank you.

the line comes next Sasha question of Sanwal UBS Our Securities. with from

Your line is now open.

Sasha Sanwal

see. to on good and - new guys, contracts good Congratulations you Thank morning. the very

Marc Edwards

Thank Sasha.

Sasha Sanwal

building to onto and that at with that direct just of you least might get rate negotiations, would at to be contracts? can some well, us rate premium on of the think some you about tack more fair the for BlackHawk handle, we two the it BlackHornet as how the question, and Maybe GreatWhite, SimStack? these a color pressure kind off we maybe and a Jud’s on color think by day be control hour handle? could for If details? high kind getting I a of a into give two without Were could about Can the getting assume level

Ron Woll

is this Sasha, Ron.

questions your So, on well part. framed

hot, bid Let’s about That there’s we a part. a the first. on have This of considerably. rigs are favor. a things working question strong in complex wells start history that have number no our most the and They with that. - earned was they I competitively I that, was hot, deepest, include that of so bragging hard some think, ships strong were had say work rights shrinks several victory working group our the would The Gulf years Mexico. peer the over in resumes of in

we’re all a rigs I many quite ways think adds these win hot are the I it’s market, pressure the Black performing, proficient, the reliability this afforded high are have ship the of man-machine Layer premiums combination, of some were on operators crews think and themselves. not really know us as to and describe success, knit back often and tied would but us; fact I closely I rates confidently top subsea again, above tied spot these good pleased. to the to so the highly cycle SimStack, strong some the in control, iron that contract for certainly themselves for up also stressed pricing us. by that just and results, in both that

strategy obviously environment course how our the in of--you contract. underway that rig out to a on proved North to moved the GreatWhite, that many ways question terms she now asked harsh with In think We on first rig. her is of Sea, so about

in contract say see our pleased we’re pleased. now second I so more would probably to and follow hands, quite We’re in a to XXXX,

right I that speaking, each we’ll get broadly right of detail broadly I going moored improving as in it’s thinking said, numbers Marc particular market way. improving although the see so those the today, turn, speaking contract, contracting are we with is so the in with you’re but not think space, I rigs, for kind harsh the each way, the the rates think think into

Marc Edwards

obviously drill attention on and drilled is a sight our fact let’s its ships, think for but hitch, well it of that I pricing of for lose just here the important has on Ocean premium a lot achieving so we’ve win maiden had call premium the was somewhat this service the without GreatWhite a first one of and North and well, very we’re similar pleased very the to start reputation performance rig as a not what Sea the a the building fleet, a very get GreatWhite. us of in we have a is its to that drill capable with aspects differentiated rig other so that back our very, service working, in delivering the

Sasha Sanwal

the pretty is immediate you Africa thinking as comes how to context idle your in mentioned the any maybe to the have, Maybe around good reactivate going locking that thank availability rigs. up, for so a regional then specifically were specific scale with plans for at there’s M&A point, of some color and in, Maybe tightening and rigs that no into get color, follow-up saying very as specifically optimal it’s you could of two also rig size, we helpful. Great, that in you, Marc, this on again a well. problem to comment but of you fleet

Marc Edwards

comes ship to in comfortable the opportunities perhaps able the drill assets all but in that in clearly can we we or very we’ve about shareholders terms that moving at activity we’ve been merge. currently of to we’ve our the forward, be our our with deepwater we’ve premium garner we’re in important Well, returns market skin merger have continuing don’t ultra we’re same own own recovering undertake our correct the shown that rates some in urge to and the to at any and look there, with to providing done got. specific space, out any what what fleet. We It’s very with a do that fleet space it as could would

Now higher I than think capex year. it year it’s spend that apparent last is this our was to all much

forward, likely aware that is We’re down. come very moving to that number

other reactivate in assets, in activate our We’re other no assets rush fleet. to

likely in this allocation as strategy. We’re in assets continuing just at moving we’re very, present to time, moving that own moving be we’ll very, we’ll very forward. themselves to and our Right carefully so particular might opportunities capex to got looking moment with be that down see forward next comfortable opportunities we’ve at now look at the relates capital very year, place, back and it

Sasha Sanwal

turn I’ll it Thank you, over.

Operator

Thank you.

Our Evercore of ISI. comes question with line James from next the West

Your is line open. now

James West

guys. morning good Hey,

Marc Edwards

James, hi.

James West

Geographically, something were too from we’re you you and the on doubled. sub-Sahara some is but some interest? spin where I where said of where know, similar exploration any you’re interesting, of seismic can maybe Marc, they and and some thought very comments that capital, the the imagine, Africa, up - exploration course, seeing maybe I hearing Schlumberger had of heightened Mexico, made I guess budgets, is the exploration other go-in where activity? when areas opening around reported, being the providers is

Marc Edwards

I think James. it’s all over,

recovery apparent, my remarks, point that related mentioned, space truth what’s up exercise, also In are with somewhat where exploration The think but opportunities, as on I said number we’ve of in budgets forward, the more to first company and the to pending us down those new of of in backed recovery. on deck, the it’s Brazil of of table familiar pipeline number will optimistic is runway too. opportunities to there to going I are approval we own in But with and exploration over in our This but ISCs location. as forward, a got to moving just--the are following deepwater seeing eventually. back exploration not of over specific We’ve coming quite some deepwater the of wells people FIDs quite regulatory going Mexico, only. so come space that here horizon, in we’re absolutely in from in There mid-water its pinpointed years, prepared one just in the you moving by company is some through you space. of That the down somewhat then want very is to investor sub-Sahara the come know, There’s needed becoming that research FIDs ultra increase itself about any bring the mid-water terms are not and a a there. ultra as see on the with that suggests it’s is A&P coming Africa, Gulf certainly, basis, maintain the moving in appreciably to there. a going actually space, horizon. the three our not number in next you’ll in sanction torturous are recovery, being actually on is and to I start our we’re

James West

Agreed.

on looked about along company follow-up these some strategic very one Offshore you’ve as threshold. me, rigs Okay, a on capital astute builds, very decisions higher there, return you’ve as out the provider for new say, board other profile do of we M&A? Diamond or made history, be been of of should upgrades over It innovative nature, the something and capital has profile from and the must of the certainly things come future, much you’ve much assets, as return say, for, a moored way think more always the you--how at higher, disciplined its versus that upgrades, companies and a how non-related capital astute versus, and well

Marc Edwards

Yes, already we’re moored so. the comfortable done with rigs that more we’ve reactivating

my the Victory again, rigs As These I Apex as Onyx, pointed still out anymore. the class a example, for during and class not Victory people remarks, many are rig. prepared classify

use like rigs essence, as should double after In terms the nothing essentially a because design, it. XX be put the that The come of go time algorithms its classified and engineering new of work rigs, on long In original it the in determine displacement, have years, XX Onyx reason years-plus. The shipyards is remaining we don’t Onyx they these of rigs. plus to left is is the we have and the as the upgrades life to the tons substantial new beyond so looks on displacement Apex it them. life Onyx these out

is features run, got in we of number interest, that in in bring and forecasts relates logistical deck they’re chain. company well bring of relatively cheap them as clients are Those rigs client the costs suggests chasing for long rigs - be assets particular of and areas have as would to terms terms that it and of where space, they and them challenges capital us today to these to our positions along have that us moving a you’ve commanding In a a in today, better certain return supply than that distressed of allocation shareholders today. forward, it VDL, yard with that asked terms back, the

on how to in a time terms of at--again, the drawer, find of position recovery out not factory. option up it. cost we the deepwater ourselves in drilling, and us, as of with in has it ago else in at this truly that efficiency laminated, we of take the you the the been and call, a the just can looked look brought factory is file bring market course drive we us we number for lower factory the Now, today, looked is stuck But the current years that floating we ultra The market. of floating something an gains pending a and is at in floating

James West

Thanks it. got Marc. Okay,

Operator

Thank you.

Our of next Hallead the Markets. Capital question from line comes with Kurt RBC

now Your line open. is

Kurt Hallead

morning. good Hey,

Marc Edwards

Kurt, hi.

Kurt Hallead

your such to some point you’ve time you’re think able off, the maybe to already for at be potentially be additional what relative you In capital cash an you. maybe those and position might shareholders, to investing for in maybe insights start to envious growth how how the options. to looking so prospect in for in of future clear, context about two allocation returning Marc, for was it I question on referenced think strategy, the at pretty looking a

Marc Edwards

return goal position our can to Obviously we cash to is question. indeed in to long-term Good be start--is where shareholders. a

that yet. at not We’re stage

just the we higher where can much opportunistic shareholder growth to can In moving to assets than itself, term transparent with what that everybody will is has long these the the we and continue returns. we out terms be assets differentiate in a it that that are the have with fleet we’ve stand to terms test fleet the which shown see of we have. rate but of is announced, there, opportunities contracting what By do at day current and forward market we is,

be Now, the that recovers, I moving maintain recognized is forward that commands when the working, that as which they get a they the further for will the therefore the remain market think we it’s think to provide, market able I assets and we premium which re-contracted road. these done, down above that service important these provide premium clients, service that assets by have that our

remember once end Now, will time XXXX will desirable will very ride comes of starts have and that upside market more. but assets the the the rig by the that repositioned first XXXX, at very, be these around, and we itself,

Kurt Hallead

it. Got

’XX rates have getting good were at drilling flow halfway at pretty and for least I’m what so in you got supply to FIDs peak involved a current ship flow The all companies robust you’ve the day you for for other some would momentum would imagine of pretty the substantial you terms that market, I deepwater in got level, shot free XXXX more into to that cash demand that utilization at the for that semis, back moored XXXX irrespective a have translate have anybody would business. companies’ levels, about the mentioned offshore demand stage back talked of oil now oil in coming, ultra comment, dynamics less to yet dynamics, is of here, I where trying than levels, you’ve overall for drill here think at market, outlook at of ultimately cash positively guess I the they maybe really the get the number offshore

on it what’s your with So again, to that? you’re day, involved perspective day

Marc Edwards

you’ve Yes, an I brought interesting think up there. point

supply exist that space. factors and ultra concerned that and that really drill ships, somewhat still in We’re about demand deepwater the relates to simple

and the only will assets seen and all out us in rates push to in so still during Demand assets supply. sixth ship higher, terms there, one give we overhang I terms seventh of some this of the and drill so but will it come that downturn, of day scrapped we’ve an back need think be generation generation to those sixth opportunity exists scrapped utilization assets terms itself out and about we semi of with so the terms is moored space, and semi of demand. that can half of that’s with is the has fixing in we’re are the there taking market number been get to market seen reduced comfortable that in more been the all more equilibrium particularly supply scrapping space, correctly. place, that Why by we’ve

this wanted premium in own and fruition, the come terms who had in with delivered a of I that we’ve award the I a follow, to their we’ve for I and four we’re three, recovery which more to on one assets command of that to think for specific drag drill but of standard market, all providing our of the some sophisticated ship that In day procurement through might might others that differentiated ships. assets ultra drill somewhat to terms of benchmark demonstrated on a four attrition we of has was think terms have strategy in just terms a a service in service. in deepwater for are but as embarked Gulf years is demand why through that back overhang in add customers a the come importantly able yes, got today contract years We and processes, ago, and seeing seeing deliver when We’re a ago, the to back you’ve rates command that seeing an we in that everybody on that premium our results just that we’re excellence, the of to available. seen chain Mexico, space, come we customer premium supply, still translate is demand supply we’re we’ve

Kurt Hallead

may, housekeeping Got it, Scott. for great that’s I have If one color. I item

of for if give You coming it some not, up generally you guys what’s you don’t you of As didn’t Can stack additional that, capex I expectation the you out XXXX. get pick assuming be you speaking--well, no Scott? mode, on rigs XXXX, a baseline thinking on referenced if I into did capex know about? or we should us did, have sense

Scott Kornblau

will that $XXX so capex has ’XX this changed to still Nothing last full-year quarter between be point, I $XXX Yes our guidance. Kurt, million so million. guided and

We XXXX. reactivations, so into expect, ’XX but we would yet, wouldn’t say of period will a still some that - in absent capex commentary thesis I definitely is that based in be Marc the be your decline right on forecasting We’re should looking even it will not less. our at be there had, yes,

Marc Edwards

have Yes, said already just reiterate not to what any we on do reactivate rigs. the call, currently any to other I’ve plans

Kurt Hallead

thank Okay, you.

Operator

you. Thank

comes the next question Our of Simmons. Ian Macpherson with from line

open. now is line Your

Ian Macpherson

and morning well on for and everyone, nice Thanks, Senegal earned. good a - Woodside Diamond award congratulations big that’s

options me fixed firm talked think I the a we’ve lot of period. or didn’t you addressed, I term was whether Have it One contracts. those entail if don’t--forgive described and terms they’re floating, what thing the it, I in about behind those hear that etc.?

Marc Edwards

after primary one the possibly award four so that. options there’s couple that There wells to the wells ourselves after on over a There to procure at of This with term a which, least looking that then further is six time is further contract two contract. available or and items according are term--sorry, six, options, a XX and that, wells client, a six are for, that the a years. just of are come further this long is well lead the primary is with wells more client the

Ian Macpherson

they Thanks price? Marc. Are fixed

Marc Edwards

No, it’s unpriced.

Ian Macpherson

you next time that year Unpriced? to finishing much before and Stampede and Okay, commitment time onto should about in for a expect BlackRhino Is thanks. window like terms what seven-month how transit four or in of Senegal. its has then you switches think of rig that could long-term Africa? could any to looks we between maybe fill a window it time going substantially, prep other that

Ron Woll

has to we’ll looking available fit, gap think, - the size do how we’re time we’re looking that so what within of there, the of we scheduled some we Ian, some so substantial that about fit to question. course at commencement, focused in but now certainly this blanks It’d to respect to at meet one is look Ron we going that Senegal we’re have nothing fill There program, at are anything but right possibilities in on. I be might that this talk between. and program, we’re Certainly have the us, going out is frame. to Woodside we’re fair today,

Ian Macpherson

mooring Last what in looking holds sort at I’m DP that next for of those the future semis for guess your for the a moored I Okay. maybe, maybe year. and are the are roll, customer upgrades in rigs given it’s far those - so Brazil, eastern for - be adaptations, going candidates could assuming just different including or outlook the Ron. for to go to not market, unclear that Valor Courage market When Thanks roll-overs but again me me, hemisphere? for

Ron Woll

good This question. is - Ron

the next with the into with Petrobras ships represents I They’ve drill Now contracted board been XXXX, nails in Valor. highest Courage doing the the of Brazil. well the think and one in

mooring, I possibility. think your thought, a sort for of gift they a candidate that’s be on could

investing would are the the last of possibility but a stacked won’t I the for point out I think comment us. rigs, attract that of the on in couple that’s Petrobras those think that I capital, has of the run months, pay fair lot today real and in probably represent so what’s include in us there. as down to the a to. DP Valor ships activity a of moored, Courage now there’s next underway of Certainly tenders well, I think for that moored, down Brazil number amount attention drill rigs

I is work good of part think of certainly in the is ahead possibility, re-contracting notion a us. as the those investing and that for

Ian Macpherson

over. it pass I’ll Ron. thanks color, the Appreciate

Operator

you. Thank

Sean of JP comes question next Morgan. Our from Meakim the with line

Your line now is open.

Sean Meakim

Thanks, morning.

getting How negotiated clarify, the think that about in to rigs, on factors do contract? BlackRhino think the require upgrades of on bid? the I you CMC upgrade is any $XX context upgrades $XX how I Did million the think the rate CMC is your million. into Just to that upgrade. the BlackHawk,

Ron Woll

should prior good preserve market, Marc’s Ron, then as of and if to is certainly exact even know upgrades. sense of that you they rigs performance Certainly both think details those both those long, morning. I in what point, but rigs so gaps don’t the rigs of do kinds these with We’ve ahead, see those in of true. way that’s I for how by any certainly widen we makes kind about have cost, of the CMCs a what a capability. of them kind into so lot and investing think, the will This is and we’ve about gotten they thought

Marc Edwards

the ourselves on speed Yes, not very to some gains of so performance, will these competition that automation to of material CMCs the and us these that over the to that we’re it’s also be, adding we’re just rest actually well. but be years, ships It’s to either not rigs adding want so terms we is in benchmark to going next continue around and added to have gap We so Black efficiency themselves course investments, we’ve bar performance or that’s required rigs, will ourselves the the for higher. laurels. it’s just clear that our this capex interesting few set on they our for not to as these technologies rig, tripping we drive drive

Sean Meakim

you for thank the that. or other should Right, over we term of Are there contracts? bonus opportunities factors these consider

Marc Edwards

relates Ron his to not in opportunity Woodside as forward kind of that at rigs, moving with to of There this is it to performance that alluded one contracts. disclosing the an but the Yes, we’re stage now. include financial remuneration right of earlier some

Sean Meakim

Got it, thank you.

of revenue of factor? me, about any in last mobilization terms terms else that one should to one for in or offset the Just we anything think

Marc Edwards

getting us point or, is Africa. Mexico is Brazil. down towing, short not to across, across Europe not Mexico in not much Atlantic of significant mobilization, this get the My Gulf from this it in so West it’s shorter It’s included to it’s understand mobilization Brazil clean so is of like vessels from that to the but from the here a just the No, Gulf considered down very the rate, a fuel is mob is to mob the rate. than really indeed, need

Sean Meakim

a lot, thanks Marc. Understood,

Operator

Thank you.

Our line Tudor, with of Taylor Zurcher and next from Pickering the Holt. question comes

line Your is now open.

Taylor Zurcher

an to Hey, morning, maybe the so it’s sell I those QX. get side wondering announcements on starting the color again and market, lot why congrats time decided to and on be we realize you’ve us and on things in improve, you of rig, older I a you some think this moored much about once whether sale, the morning. about with Good talking material Marc, or of how the contract Guardian, now, thanks. was cash the spent business here continue that could the not that then from on expect or to if but will give as how proceeds that you more call

Marc Edwards

would mentioned had more far. moored it into sit prepared a we moving from that When that material. line didn’t we’ve have perspective alluded said insignificant on why deli sale Guardian, it capex of fleet. it survey and to is much the we’ve a Scott moored result, it’s year. elected third the transformed terms one definitely on a net our have so because sale of rig decided this as moving from our on and throw invest bottom that The We was focused a up the we basically at well between special we rig was the outlier. an looked We somewhat would fleet [indiscernible] next our just felt to Guardian at differentiation. forward, from on business a strategy it bridge returns felt the looked the it towards in reason the is rig deepwater capex the really us, The of remarks from probably that swing we the sit take, the it’s not to just his business of to a too upgrade gain the the perhaps with offer drillers coming market what about party the the we in desirability, to but not and really in the off was on commodity largest was call the when but had we that back, and the that’s of remove in I gain to opportunity likely I coming

Taylor Zurcher

you’ve margins helpful. appreciate like is today, three Okay, year feels two but at a from in it dynamics Woodside at years looking today, more to per with three the market your out the and is three in early two percentage margin daily going years Woodside, the deepwater the ultra more different moored seventh XXXXs? should are least probably that that right again out segment, or basis that’s out, when gen gross market, up, things, it that middle healthy sixth, rates the out, we supply-demand perspective congrats the these the part than the looks to moored sixth level margin to of two day market at expect thinking expectation and that to gen particularly market of seventh of business start these moored and attractive a gotten that--or a Maybe on be in side the

Ron Woll

This is Ron, good morning.

I think over space time, will the do ship drill that expect improve. we

I think doubt that. over pricing about time - will no improve there’s

it earlier equation, first so feature, will we’re side of force. seeing supply space I years. But the that look not seen key going moored market. the moored assets the I on think we’re Marc the the to a which really in drill the reveal depart you Marc’s lot of the we a haven’t see in out onto think follow but much which some to those themselves comments, large seen is ship the those We’ve pointed drill have of side I ship some of think few on forces space, as space,

So better pricing. I present, the think see economics, do commodity see right ingredients better we we

happening perform, expect do, time elements differentiated improve. Marc I ship supply we I drill the that them have command that rates, think pointed in will the think the our is but over drop side premium important will drill I ships think yet over see as they you’ll as anything some to space, out, time that but shoe to around the ships

Taylor Zurcher

thanks Great, guys.

Operator

Thank to and session. over like call Marc I answer turn any to conclude further would does for you. question This the back remarks. today’s Edwards now

Marc Edwards

we forward and look with again quarter. you to call, today’s in participating for you speaking Thank next once

Operator

for This today’s in you. thank program. does include gentlemen, Thank Ladies today’s you conference. participating and

day. You have may disconnect. great all Everyone a

Diamond Offshore Drilling (DODRW) 29 Apr 192019 Q1 Earnings call transcript